India, China, Russia May Shift Energy Trade to Local Currencies as Dollar Dominance Faces Challenges

Energy

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Updated on 16 Nov 2025, 09:22 am

A recent paper from the Oxford Institute for Energy Studies (OIES) highlights potential shifts in global energy markets, particularly concerning the US dollar's dominance. The study projects that nations such as India, China, and Russia might increasingly conduct energy trade using their local currencies if the US dollar experiences instability. This is attributed to the US administration's power to influence global market conditions through sanctions, especially on energy imports priced and cleared in US dollars.

The OIES paper argues that the politicisation of energy by the Donald Trump administration could cap market growth, prompting strategic buyers to seek reduced import reliance and develop domestic, decarbonised energy alternatives. It notes that countries like Russia, China, India, and Iran have already explored conducting business in local currencies to bypass US clearing institutions. This trend could accelerate if the US dollar and debt markets become less stable, potentially undermining international dollar-denominated price benchmarks.

While the US is set to significantly increase its LNG supply capacity, aggressive moves to secure markets might deter some buyers. In contrast, Qatar plans to leverage its low-cost LNG portfolio purely as a commercial offering in a competitive market. Lower global gas prices are anticipated to boost demand in several Asian markets, where price sensitivity may outweigh decarbonisation policies.

Impact This news can significantly impact the Indian stock market by influencing energy import costs, trade balances, and currency fluctuations. Companies involved in energy trading, refining, and utilities could face changes in operational costs and revenue streams. Geopolitical shifts and currency dynamics can also affect investor sentiment towards emerging markets. Rating: 8/10

Difficult Terms:

* **US Dollar Dominance**: Refers to the widespread use and acceptance of the US dollar as the primary currency for international trade, finance, and as a reserve currency by central banks worldwide. * **Local Currencies**: The official currency issued by a government of a specific country, used for transactions within that country. * **Sanctions**: Penalties or restrictions imposed by one country on another for political reasons, often affecting trade and financial transactions. * **Secondary Sanctions**: Sanctions imposed by a country on entities or individuals in third countries that engage in certain transactions with a sanctioned country or entity. * **LNG (Liquefied Natural Gas)**: Natural gas that has been cooled down to liquid form for easier storage and transportation. It is a key commodity in the global energy market. * **Decarbonised Alternatives**: Energy sources or technologies that produce little to no greenhouse gas emissions, such as renewable energy (solar, wind) and nuclear power. * **Price Benchmarks**: A reference point used to establish the price of a commodity or financial instrument in the market. For energy, this could be indices like Brent crude or WTI for oil, and specific pricing hubs for natural gas.